Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 2005

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission
file number
0-19969

ARKANSAS BEST CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

6711

71-0673405

(State or other jurisdiction of
incorporation or organization)

(Primary Standard Industrial
Classification Code No.)

(I.R.S. Employer
Identification No.)

3801 Old Greenwood Road
Fort Smith, Arkansas 72903
(479) 785-6000

(Address, including zip code, and telephone number, including
area code, of the registrants principal executive offices)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrants (1) have filed all reports required to be filed
by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days. Yes
þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.

Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements
at that date, but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements
at that date, but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

The accumulated loss from foreign currency translation in accumulated other comprehensive
loss is $0.3 million, net of tax benefits of $0.2 million at December 31, 2004 and June 30,
2005.

(b)

The minimum pension liability included in accumulated other comprehensive loss is $4.1
million, net of tax benefits of $2.6 million at December 31, 2004
and June 30, 2005.

(c)

Total comprehensive income for the three months ended June 30, 2005 was $23.4 million. Total
comprehensive income for the three and six months ended June 30, 2004 was $19.3 million and
$23.8 million, respectively.

Arkansas Best Corporation (the Company) is a holding company engaged through its subsidiaries
primarily in motor carrier and intermodal transportation operations. Principal subsidiaries are
ABF Freight System, Inc. (ABF), Clipper Exxpress Company (Clipper) and FleetNet America, Inc.
(FleetNet).

On March 28, 2003, the International Brotherhood of Teamsters (IBT) announced the ratification
of its National Master Freight Agreement with the Motor Freight Carriers Association (MFCA) by
its membership. ABF is a member of the MFCA. The agreement has a five-year term and was effective
April 1, 2003. The agreement provides for annual contractual wage and benefit increases of
approximately 3.2%  3.4%. Approximately 78% of ABFs employees are covered by the agreement.
Carrier members of the MFCA ratified the agreement on the same date.

NOTE B  FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim financial
statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended June 30, 2005 are
not necessarily indicative of the results that may be expected for the year ending December 31,
2005. For further information, refer to the Companys financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004.

The difference between the effective tax rate for the three and six months ended June 30, 2005 and
2004 and the federal statutory rate resulted from state income taxes, tax-exempt income and
nondeductible expenses.

The Company has a program to repurchase, in the open market or in privately negotiated
transactions, up to a maximum of $25.0 million of the Companys Common Stock. The repurchases may
be made either from the Companys cash reserves or from other available sources. The program has no
expiration date but may be terminated at any time at the Board of Directors discretion. During the
second quarter of 2005, the Company made open-market purchases of 125,000 shares of its Common
Stock for a purchase price of $4.0 million. Since January 23, 2003, the Company has purchased a
total of 634,150 shares, totaling $17.9 million. See Note M regarding the Board of Directors
authorization of additional amounts for its current program to repurchase shares, subsequent to
June 30, 2005.

The following table is a summary of dividends declared and/or paid during the applicable quarter
being reported upon or subsequent thereto. See Note M regarding the increase in the quarterly
dividend, subsequent to June 30, 2005.

Short-Term Investments: The Companys policy is that short-term investment securities are
classified as available-for-sale and are stated at fair value with related unrealized gains and
losses, if any, reported net of tax in accumulated other comprehensive income. These investments
consist of auction rate securities with auction reset periods of less than 90 days. Interest and
dividends related to these investments are included in short-term investment income on the
Companys consolidated statement of income.

Reclassifications: Certain prior year amounts have been reclassified to conform to the current year
presentation, including the reclassification of auction rate securities in the amount of $38.5
million to short-term investments. Auction rate securities, because of the short duration of their
reset periods, were included in cash and cash equivalents at December 31, 2004. As a result of this
reclassification, the Companys cash flow from investing activities includes the investments and
sales of auction rate securities. This reclassification had no impact on previously reported total
current assets, total assets, or statements of income and does not affect previously reported cash
flows from operating activities.

NOTE C  STOCK-BASED COMPENSATION

On April 20, 2005, the stockholders of the Company approved the Companys 2005 Ownership Incentive
Plan (the Plan). The Plan supersedes the Companys 2002 Stock Option Plan and 2000 Non-qualified
Stock Option Plan with respect to future awards and provides for the granting of 1.5 million shares
of incentive and nonqualified stock options, stock appreciation rights, restricted stock and
restricted stock units, which may be paid in cash or stock or a combination thereof, as determined
by the Companys Compensation Committee of the Board of Directors (Compensation Committee). On
that same day, the Compensation Committee also approved the Form of Restricted Stock Award
Agreement (Non-Employee Director) and the Form of Restricted Stock Award Agreement (Employee).
During the second quarter of 2005, the Compensation Committee granted 182,250 shares of restricted
stock under these agreements, at a weighted-average fair value of $32.62, per share. The restricted
stock grants vest at the end of a five-year period beginning on the date of the grant, subject to
accelerated vesting due to death, disability, retirement and change-in-control provisions. The
Company amortizes the fair value of the restricted stock awards to compensation expense over the
five-year vesting period and accelerates unrecognized compensation upon a grantees death,
disability or retirement. Compensation expense from restricted stock awards totaled $0.1 million, after tax, for the three and six
months ended June 30, 2005.

Until April 20, 2005, the Company maintained three stock option plans which provided for the
granting of options to directors and key employees of the Company. The 1992 Stock Option Plan
expired on December 31, 2001 and, therefore, no new options can be granted under this plan. The
2000 Non-Qualified Stock Option Plan is a broad-based plan that allowed for the granting of 1.0
million options. The 2002 Stock Option Plan allowed for the granting of 1.0 million options, as
well as two types of stock appreciation rights (SARs), which are payable in shares or cash.
Employer SARs allow the Company to decide, when an option is exercised, whether or not to treat the
exercise as a SAR. Employee SARs allow the optionee to decide, when exercising an option, whether
or not to treat it as a SAR. As of June 30, 2005, the Company had not elected to treat any
exercised options as Employer SARs and no employee SARs had been granted. All options or SARs
granted are exercisable starting on the first anniversary of the grant date, with 20.0% of the
shares or rights covered thereby becoming exercisable at that time, with an additional 20.0% of the
option shares or SARs becoming exercisable on each successive anniversary date, and full vesting
occurring on the fifth anniversary date. The options or SARs were granted for a term of 10 years.
There were no options granted during the first six months of 2005. The options or SARs granted
during the first six months of 2004, under each plan, are as follows:

2004

2000 Non-Qualified Stock Option Plan  Options

49,000

2002 Stock Option Plan  Options/Employer SARs

277,000

The Company accounts for stock-based compensation under the intrinsic value method and the
recognition and measurement principles of Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, and related interpretations, including Financial
Accounting Standards Board Interpretation No. 44 (FIN 44), Accounting for Certain Transactions
Involving Stock Compensation. No stock-based employee compensation expense from options granted is
reflected in net income for the three and six months ended June 30, 2005 or 2004, as all options
granted under the Companys plans have an exercise price equal to the market value of the
underlying Common Stock on the date of grant.

For companies accounting for their stock-based compensation under the APB 25 intrinsic value
method, pro forma information regarding net income and earnings per share is required and is
determined as if the Company had accounted for its employee stock options under the fair value
method of Statement of Financial Accounting Standards No. 123 (FAS 123), Accounting for
Stock-Based Compensation. The fair value for these options is estimated at the date of grant, using
a Black-Scholes option pricing model. The Companys pro forma assumptions for the 2004 grants are
as follows:

2004

Risk-free rates

2.9

%

Volatility

53.6

%

Weighted-average life

4years

Dividend yields

1.7

%

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting period.

The following table illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provided for under FAS 123, to all stock-based employee
compensation:

Three Months Ended

Six Months Ended

June 30

June 30

2005

2004

2005

2004

($ thousands, except per share data)

Net income  as reported

$

23,407

$

19,298

$

33,871

$

23,759

Add back stock compensation expense from restricted
stock awards, included in net income, net of tax

140



140



Less total stock compensation expense determined
under fair value-based methods for
all awards, net of tax benefits

(684

)

(749

)

(1,232

)

(1,692

)

Net income  pro forma

$

22,863

$

18,549

$

32,779

$

22,067

Net income per share  as reported (basic)

$

0.93

$

0.77

$

1.34

$

0.95

Net income per share  as reported (diluted)

$

0.91

$

0.76

$

1.31

$

0.94

Net income per share  pro forma (basic)

$

0.90

$

0.74

$

1.29

$

0.88

Net income per share  pro forma (diluted)

$

0.90

$

0.74

$

1.28

$

0.88

See Note D for recent accounting pronouncements regarding the Financial Accounting Standards
Boards Statement No. 123(R) (FAS 123(R)), Share-Based Payment, issued in December 2004 and
effective for the Company on January 1, 2006.

NOTE D  RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123(R)
(FAS 123(R)), Share-Based Payment. FAS 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income statement based on
their fair values. On April 14, 2005, the Securities and Exchange Commission (SEC) announced the
adoption of an amendment to the required compliance dates for FAS 123(R). As a result, this
statement will be effective for the Company on January 1, 2006. The negative impact, in each
quarter of 2006, of prior unvested stock option grants is estimated to be approximately $0.01 per
diluted common share, net of estimated tax benefits.

In December 2004, the FASB issued Statement No. 153 (FAS 153), Exchanges of Nonmonetary Assets,
an Amendment of APB Opinion No. 29. FAS 153 is based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged. This statement is
effective for the Companys nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. FAS 153 is not expected to have a material impact upon the Companys financial
statements or related disclosures.

The Companys short-term, available-for-sale investments consist of auction rate securities. The
following is a summary of the Companys auction rate security investments, on a specific
identification basis, at June 30, 2005 and December 31, 2004:

June 30, 2005

December 31, 2004

U.S. corporate securities

$



$

4,904

U.S. state and local municipal securities

58,069

23,610

Total debt securities

58,069

28,514

Preferred equity securities

13,500

10,000

$

71,569

$

38,514

The carrying value of the Companys auction rate securities approximates fair value. There
were no unrealized gains or losses for the three and six months ended June 30, 2005.

The Company sold $112.9 million in auction rate securities during the six months ended June 30,
2005, with no realized gains or losses. Interest and dividends related to these investments are
included in short-term investment income on the Companys consolidated statement of income.

The carrying values of the Companys short-term investments at June 30, 2005, by ultimate
contractual maturity of the underlying security, are shown below. Actual maturities may differ from
the ultimate contractual maturities because the issuers of the securities may have the right to
prepay obligations without prepayment penalties. The Companys auction reset periods with respect
to its auction rate securities are generally 7, 28, 35 or 49 days, thus limiting the Companys
exposure to interest rate risk.

June 30, 2005

Due within 1 year

$



Due after 1 year through 5 years



Due after 5 years through 10 years



Due after 10 years

58,069

58,069

Preferred equity securities

13,500

$

71,569

NOTE F  LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS

Various legal actions, the majority of which arise in the normal course of business, are pending.
The Company maintains liability insurance against certain risks arising out of the normal course of
its business, subject to certain self-insured retention limits. The Company has accruals for
certain legal and environmental exposures. None of these legal actions is expected to have a
material adverse effect on the Companys financial condition, cash flows or results of operations.

The Companys subsidiaries, or lessees, store fuel for use in tractors and trucks in approximately
77 underground tanks located in 23 states. Maintenance of such tanks is regulated at the federal
and, in some cases, state levels. The Company believes that it is in substantial compliance with
all such regulations. The Companys underground storage tanks are required to have leak detection
systems. The Company is not aware of any leaks from such tanks that could reasonably be expected to
have a material adverse effect on the Company.

The Company has received notices from the Environmental Protection Agency (EPA) and others that
it has been identified as a potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act, or other federal or state environmental
statutes, at several hazardous waste sites. After investigating the Companys or its subsidiaries
involvement in waste disposal or waste generation at such sites, the Company has either agreed to
de minimis settlements (aggregating approximately $134,000 over the last 10 years primarily at
eight sites) or believes its obligations, other than those specifically accrued for with respect to
such sites, would involve immaterial monetary liability, although there can be no assurances in
this regard.

As of June 30, 2005 and December 31, 2004, the Company had accrued approximately $3.2 million and
$3.3 million, respectively, to provide for environmental-related liabilities. The Companys
environmental accrual is based on managements best estimate of the liability. The Companys
estimate is founded on managements experience in dealing with similar environmental matters and on
actual testing performed at some sites. Management believes that the accrual is adequate to cover
environmental liabilities based on the present environmental regulations. Accruals for
environmental liability are included in the balance sheet as accrued expenses and in other
liabilities. See Note M regarding the sale of properties, subsequent to June 30, 2005, that were
being leased to G.I. Trucking Company (G.I. Trucking) and G.I. Truckings assumption of
environmental liabilities as a result of the sale.

NOTE G  DERIVATIVE FINANCIAL INSTRUMENTS

The Company was a party to an interest rate swap on a notional amount of $110.0 million, which
matured on April 1, 2005. For the six months ended June 30, 2005, payments on the swap and changes
in the fair value of the swap were approximately equal in amount.

NOTE H  CREDIT AGREEMENT

On June 3, 2005, the Company amended and restated its existing $225.0 million Credit Agreement
dated as of May 15, 2002 with Wells Fargo Bank, National Association as Administrative Agent and
Lead Arranger; Fleet National Bank and SunTrust Bank as Co-Syndication Agents; and Wachovia Bank,
National Association and The Bank of Tokyo-Mitsubishi, LTD as Co-Documentation Agents. The amended
and restated Credit Agreement has a maturity date of May 15, 2010. The Credit Agreement provides
for up to $225.0 million of revolving credit loans (including a $150.0 million sublimit for
letters of credit) and allows the Company to request extensions of the maturity date for a period
not to exceed two years, subject to participating bank approval. The Credit Agreement also allows
the Company to request an increase in the amount of revolving credit loans as long as the total
revolving credit loans do not exceed $275.0 million, subject to the commitments of the
participating banks.

At June 30, 2005, there were no outstanding Revolver Advances and approximately $49.2 million of
outstanding letters of credit. At December 31, 2004, there were no outstanding Revolver Advances
and approximately $54.1 million of outstanding letters of credit. The amount available for
borrowing under the Credit Agreement at June 30, 2005 was $175.8 million.

The Credit Agreement contains various covenants, which limit, among other things, indebtedness and
dispositions of assets and which require the Company to meet certain quarterly financial ratio
tests. As of June 30, 2005, the Company was in compliance with the covenants.

Interest rates under the agreement are at variable rates as defined by the Credit Agreement. The
Credit Agreement contains a pricing grid that determines its LIBOR margin, facility fees,
utilization fees and letter of

credit fees. The Company will pay a utilization fee if the borrowings under the Credit Agreement
exceed 50% of the $225.0 million Credit Agreement facility amount. The pricing grid is based on the
Companys senior debt rating agency ratings. A change in the Companys senior debt ratings could
potentially impact its Credit Agreement pricing. The Company is currently rated BBB+ by Standard &
Poors Rating Service (S&P) and Baa3 by Moodys Investors Service, Inc. (Moodys). The Company
has no downward rating triggers that would accelerate the maturity of its debt. On October 15,
2004, S&P revised its outlook on the Company to positive from stable. At the same time, S&P
affirmed the Companys BBB+ corporate credit rating. On February 22, 2005, Moodys confirmed the
Companys Baa3 senior debt rating and changed the outlook to positive from stable.

NOTE I  PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The following is a summary of the components of Net Periodic Benefit Cost:

Three Months Ended June 30

Supplemental

Postretirement

Pension Benefits

Pension Plan

Health Benefits

2005

2004

2005

2004

2005

2004

($ thousands)

Service cost

$

2,329

$

2,123

$

192

$

185

$

42

$

37

Interest cost

2,421

2,420

321

305

201

238

Expected return on plan assets

(3,254

)

(3,138

)









Transition (asset) obligation recognition

(2

)

(2

)

(64

)

(64

)

34

34

Amortization of prior service cost (credit)

(230

)

(230

)

390

390

7

33

Recognized net actuarial loss and other

1,241

1,197

341

340

214

255

Net periodic benefit cost

$

2,505

$

2,370

$

1,180

$

1,156

$

498

$

597

Six Months Ended June 30

Supplemental

Postretirement

Pension Benefits

Pension Plan

Health Benefits

2005

2004

2005

2004

2005

2004

($ thousands)

Service cost

$

4,658

$

4,245

$

384

$

371

$

84

$

74

Interest cost

4,842

4,841

641

610

402

476

Expected return on plan assets

(6,509

)

(6,276

)









Transition (asset) obligation recognition

(4

)

(4

)

(128

)

(128

)

67

67

Amortization of prior service cost (credit)

(461

)

(461

)

780

780

15

66

Recognized net actuarial loss and other

2,484

2,395

683

679

428

511

Net periodic benefit cost

$

5,010

$

4,740

$

2,360

$

2,312

$

996

$

1,194

The Companys full-year 2005 pension expense is estimated to be $10.0 million compared to
$9.5 million for the year ended December 31, 2004. In 2005, the Company does not have a required
minimum contribution to its nonunion pension plan. Currently available information indicates a
maximum allowable tax-deductible contribution of approximately $11.0 million for 2005. The Company
made a tax-deductible contribution of $6.0 million in the second quarter of 2005. Management is
evaluating whether to make additional tax-deductible contributions during 2005.

For the three and six months ended June 30, 2005, the Company had no outstanding stock options
granted that were antidilutive. For the three and six months ended June 30, 2004 respectively, the
Company had outstanding 326,000 and 277,060 in stock options granted that were antidilutive and
therefore were not included in the diluted earnings-per-share calculations for either period
presented.

NOTE K  ASSETS HELD FOR SALE

Total assets held for sale at December 31, 2004 were $1.4 million. During the first six months of
2005, additional assets of $8.7 million were identified and reclassified to assets held for sale.
Nonoperating terminals and revenue equipment carried at $3.0 million were sold for gains of $0.7
million, of which $48,000 related to real estate and was reported below the operating income line
and $0.6 million was related to equipment and was reported in operating income.

On August 1, 2001, the Company sold the stock of G.I. Trucking for $40.5 million in cash to a
company formed by the senior executives of G.I. Trucking and Estes Express Lines (Estes). The
Company retained ownership of three California terminal facilities and agreed to lease them to G.I.
Trucking for a period of up to four years. The lease agreements contained purchase options for G.I.
Trucking to purchase the three terminals.

Included in the $8.7 million of assets reclassified to assets held for sale, are the three
facilities leased to G.I. Trucking. During the second quarter of 2005, G.I. Trucking gave notice
that it was exercising its rights to purchase these terminals. As a result, the Company
reclassified $5.3 million from land and structures to assets

held for sale. See Note M regarding the subsequent sale of the terminals after June 30, 2005.
Total assets held for sale at June 30, 2005 were $7.1 million.

At June 30, 2005, management was not aware of any events or circumstances indicating the Companys
long-lived assets would not be recoverable.

NOTE L  OPERATING SEGMENT DATA

The Company uses the management approach to determine its reportable operating segments, as well
as to determine the basis of reporting the operating segment information. The management approach
focuses on financial information that the Companys management uses to make decisions about
operating matters. Management uses operating revenues, operating expense categories, operating
ratios, operating income and key operating statistics to evaluate performance and allocate
resources to the Companys operating segments. During the periods being reported on, the Company
operated in two defined reportable operating segments:
(1) ABF and (2) Clipper.

The Company eliminates intercompany transactions in consolidation. However, the information used
by the Companys management with respect to its reportable segments is before intercompany
eliminations of revenues and expenses. Intercompany revenues and expenses are not significant.

Further classifications of operations or revenues by geographic location beyond the descriptions
provided above are impractical and are, therefore, not provided. The Companys foreign operations
are not significant.

The following tables reflect reportable operating segment information for the Company, as well as a
reconciliation of reportable segment information to the Companys consolidated operating revenues,
operating expenses, operating income and consolidated income before income taxes:

On July 27, 2005, the Company closed the transaction for the sale of three terminals that were
being leased to G.I. Trucking (see Note K). As a result, the Company will recognize an after-tax
gain of approximately $9.8 million, or $0.38 per diluted common share, in the third quarter of
2005. The gain includes the elimination of a $1.3 million reserve for an environmental obligation
that was assumed by G.I. Trucking.

On July 28, 2005 the Board of Directors announced that it had authorized an addition of $50.0
million to its current program to repurchase shares of Arkansas Bests Common Stock. At June 30,
2005, there was $7.1 million remaining to be used for stock purchases as a part of Arkansas Bests
original $25.0 million stock repurchase program, announced on January 23, 2003. The Company plans
to continue making open-market purchases of its stock on an opportunistic basis. On that same
date, the Board also increased its quarterly dividend from $0.12 per share to $0.15 per share.

The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates.

The Companys accounting estimates that are critical, or the most important, to understand the
Companys financial condition and results of operations and that require management of the Company
to make the most difficult judgments are described in the Companys 2004 Form 10-K. No changes to
the Companys methodologies for its critical accounting estimates have occurred since the Company
filed its 2004 Form 10-K.

Except as disclosed in Note D, the Company has no current plans to change the methodologies
utilized in determining its critical accounting estimates.

Cash and cash equivalents and short-term investments totaled $89.2 million at June 30, 2005 and
$70.9 million at December 31, 2004, respectively. During the six months ended June 30, 2005, cash
provided from operations of $63.3 million and proceeds from asset sales of $5.0 million were used
to purchase revenue equipment (tractors and trailers used primarily in the Companys motor carrier
transportation operations) and other property and equipment totaling $35.6 million, pay dividends
on Common Stock of $6.1 million and purchase 162,650 shares of the Companys Common Stock for $5.5
million. During the six months ended June 30, 2004, cash provided from operations of $59.0 million
and proceeds from asset sales of $5.0 million were used to purchase revenue equipment and other
property and equipment totaling $35.9 million, pay dividends on Common Stock of $6.0 million and
purchase 271,500 shares of the Companys Common Stock for $7.5 million.

In 2005, the Company estimates net capital expenditures to be approximately $94.0 million, which
relates primarily to ABF. This consists of $61.0 million for revenue equipment and approximately
$33.0 million for real estate and other. Net capital expenditures anticipated for 2005 are greater
than the 2004 total of $63.6 million. A few significant items explain most of the increase in
anticipated 2005 net capital expenditures. The unit cost increases for replacement tractors and
trailers represent an increase of approximately $5.5 million. Replacement of a greater number of
trailers is anticipated in 2005 over 2004 levels, which increases net capital expenditures by $3.5
million. Expansion of the road tractor and trailer fleet causes an increase of approximately $5.0
million, and expansion and maintenance of ABFs terminal network and other net capital
expenditures are anticipated to increase by $12.0 million over 2004.

The Company does not have a required minimum contribution to its nonunion pension plan for 2005.
Currently available information indicates a maximum allowable tax-deductible contribution of
approximately $11.0 million for 2005. The Company made a tax-deductible contribution of $6.0
million in the second quarter of 2005. Management is evaluating whether to make additional
tax-deductible contributions during 2005.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

The Company has an unfunded supplemental pension benefit plan for the purpose of providing
supplemental retirement benefits to executive officers of the Company. Based upon currently
available information, future distributions of benefits are not anticipated in 2005 and are
expected to be between an estimated $10.0 million and $11.0 million in 2006. Distributions can be
funded from either the Companys corporate life insurance policies or other general corporate
assets.

The Company was a party to an interest rate swap on a notional amount of $110.0 million, which
matured on April 1, 2005.

The Company has three primary sources of available liquidity, which are its operating cash,
short-term investments and the $175.8 million it has available under its revolving Credit Agreement
at June 30, 2005. The Company has generated between approximately $74.0 million and $137.0 million
of operating cash annually for the years 2002 through 2004. Management of the Company is not aware
of any known trends or uncertainties that would cause a significant change in its sources of
liquidity. The Company expects cash from operations, short-term investments and its available
revolver to continue to be primary sources to finance its annual debt maturities, lease
commitments, letter of credit commitments, quarterly dividends, stock repurchases, nonunion pension
contributions and capital expenditures. Please refer to the Companys 2004 Form 10-K for
information about the Companys debt maturities and lease commitments. No material changes to the
Companys debt maturities or lease commitments have occurred since December 31, 2004.

On June 3, 2005, the Company amended and restated its existing $225.0 million Credit Agreement
dated as of May 15, 2002 with Wells Fargo Bank, National Association as Administrative Agent and
Lead Arranger; Fleet National Bank and SunTrust Bank as Co-Syndication Agents; and Wachovia Bank,
National Association and The Bank of Tokyo-Mitsubishi, LTD as Co-Documentation Agents. The amended
and restated Credit Agreement has a maturity date of May 15, 2010. The Credit Agreement provides
for up to $225.0 million of revolving credit loans (including a $150.0 million sublimit for
letters of credit) and allows the Company to request extensions of the maturity date for a period
not to exceed two years, subject to participating bank approval. The Credit Agreement also allows
the Company to request an increase in the amount of revolving credit loans as long as the total
revolving credit loans do not exceed $275.0 million, subject to the commitments of the
participating banks.

At June 30, 2005, there were no outstanding Revolver Advances and approximately $49.2 million of
outstanding letters of credit. At December 31, 2004, there were no outstanding Revolver Advances
and approximately $54.1 million of outstanding letters of credit. The Credit Agreement contains
various covenants, which limit, among other things, indebtedness and dispositions of assets and
which require the Company to meet certain quarterly financial ratio tests. As of June 30, 2005, the
Company was in compliance with the covenants.

Interest rates under the agreement are at variable rates as defined by the Credit Agreement. The
Credit Agreement contains a pricing grid that determines its LIBOR margin, facility fees,
utilization fees and letter of credit fees. The Company will pay a utilization fee if the
borrowings under the Credit Agreement exceed 50% of the $225.0 million Credit Agreement facility
amount. The pricing grid is based on the Companys senior debt rating agency ratings. A change in
the Companys senior debt ratings could potentially impact its Credit Agreement pricing. The
Company is currently rated BBB+ by Standard & Poors Rating Service (S&P) and Baa3 by Moodys
Investors Service, Inc. (Moodys). The Company has no downward rating triggers that would
accelerate the maturity of its debt. On October 15, 2004, S&P revised its outlook on the Company to
positive from stable. At the same time, S&P affirmed the Companys BBB+ corporate credit rating. On
February 22, 2005, Moodys confirmed the Companys Baa3 senior debt rating and changed the outlook
to positive from stable.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

The Company has not historically entered into financial instruments for trading purposes, nor has
the Company historically engaged in hedging fuel prices. No such instruments were outstanding
during 2005 or 2004.

Off-Balance-Sheet Arrangements

The Companys off-balance-sheet arrangements are fully described in the Companys 2004 Form 10-K.
No material changes to the Companys off-balance-sheet arrangements have occurred since the Company
filed its 2004 Form 10-K. The Company has no investments, loans or any other known contractual
arrangements with special-purpose entities, variable interest entities or financial partnerships
and has no outstanding loans with executive officers or directors of the Company.

Operating Segment Data

The following table sets forth, for the periods indicated, a summary of the Companys operating
expenses by segment as a percentage of revenue for the applicable segment:

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

Results of Operations

Executive Overview

Arkansas Best Corporations operations include two primary operating subsidiaries, ABF and Clipper.
For the six months ended June 30, 2005, ABF represented 91.7% and Clipper represented 6.0% of total
revenues. The Companys results of operations are primarily driven by ABF. For the six months ended
June 30, 2005, ABFs revenues include 91% LTL revenues and 9% truckload (TL) revenues. On an
ongoing basis, ABFs ability to operate profitably and generate cash is impacted by its LTL
tonnage, which creates operating leverage at higher levels, the pricing environment and its ability
to manage costs effectively, primarily in the area of salaries, wages and benefits (labor). ABF
pursues truckload-sized shipments as long as service on its base LTL business is not adversely
affected and good margins can be maintained.

ABFs ability to maintain or grow existing tonnage levels is impacted by the state of the U.S.
economy as well as a number of other competitive factors, which are more fully described in the
General Development of Business section of the Companys 2004 Form 10-K. ABF experienced minimal
year-over-year LTL tonnage increases in the first quarter of 2004. ABFs 2004 year-over-year LTL
tonnage levels began to dramatically improve in April by percentages not experienced in several
years and increased 7.8% for the second quarter of 2004, as compared to the same period in 2003.
ABFs full-year 2004 LTL tonnage per day increased 6.8% over 2003 and its full-year 2004 TL
tonnage per day increased 13.0% over 2003.

During the three and six months ended June 30, 2005, ABFs LTL tonnage per day decreased 3.4% and
0.4% respectively, when compared to the same periods in 2004. Truckload tonnage per day improved
by 7.8% and 7.3% for the three and six months ended June 30, 2005, when compared to the same
periods in 2004. LTL year-over-year tonnage comparisons for the second quarter 2005 were
difficult because of the improved LTL tonnage levels experienced by ABF in the same period in
2004. Although LTL tonnage levels have decreased, ABF improved its operating ratio for both the
three and six months ended June 30, 2005 through revenue yield improvements, excluding fuel
surcharges, and cost reductions as more fully discussed in the ABF section of the Companys
Management Discussion and Analysis. Through the first twenty-one days of July, average daily
tonnage figures in ABFs total business are lower than last year by a little more than 3.0%. For
the remainder of 2005, LTL and total tonnage comparisons will continue to be difficult because of
increased tonnage levels ABF experienced in 2004.

The pricing environment is a key to ABFs operating performance. The pricing environment determines
ABFs ability to obtain compensatory margins and price increases on customer accounts. The impact
of changes in the pricing environment is typically measured by LTL billed revenue per
hundredweight. This measure is affected by profile factors such as average shipment size, average
length of haul, density and customer and geographic mix. For many years, consistent profile
characteristics made LTL billed revenue per hundredweight changes a reasonable, although
approximate, measure of price change. In the last few years, it has become more difficult to
quantify with sufficient accuracy the impact of larger changes in profile characteristics in order
to estimate true price changes. ABF focuses on individual account profitability and rarely
considers revenue per hundredweight in its customer account or market evaluations. For ABF, total
company profitability must be considered together with measures of LTL billed revenue per
hundredweight changes. During the full year of 2004, the pricing environment remained firm as
industry capacity continued to tighten. The pricing environment for the first six months of 2005
has been competitive and consistent with 2004. For the three and six months ended June 30, 2005,
LTL billed revenue per hundredweight, excluding the fuel surcharge, increased 3.2% and 2.7%
compared to the same periods in 2004. For the three and six months ended June 30, 2005, LTL billed
revenue per hundredweight, including the fuel surcharge, increased 8.5% and 7.8% compared to the
same periods in 2004.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

Management of the Company expects the pricing environment to remain consistent, although there can
be no assurances in this regard.

For first six months of 2005, salaries, wages and benefit costs accounted for 61.8% of ABFs
revenue. Labor costs are impacted by ABFs contractual obligations under its agreement with the
International Brotherhood of Teamsters (IBT). In addition, ABFs ability to effectively manage
labor costs has a direct impact on its operating performance. Shipments per dock, street and yard
hour (DSY) and total pounds-per-mile are measures ABF uses to assess this effectiveness. DSY is
used to measure effectiveness in ABFs local operations, although total weight per hour may also be
a relevant measure when the average shipment size is changing. Total pounds-per-mile is used by ABF
to measure the effectiveness of its linehaul operations. ABF is generally very effective in
managing its labor costs to business levels.

ABF has experienced higher fuel prices in recent years. However, ABF charges a fuel surcharge based
on changes in diesel fuel prices compared to a national index. The ABF fuel surcharge rate in
effect is available on the ABF Web site at abf.com.

In May 2005, ABF reached agreement with the International Brotherhood of Teamsters union on
specific language outlining ABFs use of the Premium Service Employee provisions of its labor
agreement in 13 Northeastern facilities. ABFs implementation of this service began in June 2005.
As a result of this agreement, ABF will be able to offer more second-day service lanes and can now
provide overnight and even same-day service in selective lanes in the dense Northeastern market.
The rollout of this service will be deliberate and ABF will build on initial successes in
additional locations. In addition to helping attract short-haul business, the Premium Service
Employee and other internal initiatives are helpful in attracting premium-priced, time-definite
freight (time-definite freight). Management of the Company believes this time-definite freight
represents a smaller portion of ABFs total revenues than other similarly situated LTL companies.
Management of the Company is working to increase ABFs percentage of time-definite freight.

The Company ended the second quarter of 2005 with no borrowings under its revolving Credit
Agreement, $89.2 million in cash and short-term investments and $493.9 million in stockholders
equity. Because of the Companys financial position at June 30, 2005, the Company should continue
to be in a position to pursue profitable growth opportunities.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Consolidated revenues for the three and six months ended June 30, 2005 increased 7.6% and 9.3%
respectively and operating income increased 21.1% and 39.4% respectively, compared to the same
periods in 2004, primarily due to revenue growth and improved operating results at ABF, as
discussed below in the ABF section of Managements Discussion and Analysis.

The increases of 19.7% and 39.4% in diluted earnings per share for the three and six months ended
June 30, 2005 over the same periods in 2004 reflect primarily improved operating results at ABF, as
discussed below in the ABF section of Managements Discussion and Analysis.

ABF Freight System, Inc.

Effective May 23, 2005 and June 14, 2004, ABF implemented general rate increases to cover known
and expected cost increases. Typically, the increases were 5.8% and 5.9% respectively, although
the amounts vary by lane and shipment characteristic. ABFs increases in reported revenue per
hundredweight for the three and

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

six months ended June 30, 2005 versus the same periods in 2004 has been impacted not only by the
general rate increase and fuel surcharge increases, but also by changes in profile such as length
of haul, weight per shipment, density and customer and geographic mix. ABF charges a fuel
surcharge, based on changes in diesel fuel prices compared to a national index. The ABF fuel
surcharge rate in effect is available on the ABF Web site at
abf.com. The fuel surcharge in effect
averaged 9.9% and 9.4% of revenue for the three and six months ended June 30, 2005, compared to
5.2% and 4.8% for the same periods in 2004.

Revenues for the three and six months ended June 30, 2005 were $417.5 million and $801.6 million
respectively, compared to $391.0 million and $737.1 million during the same periods in 2004.

The following tables provide a comparison of key operating statistics for ABF:

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

ABFs revenue-per-day increases of 6.8% and 8.7% for three and six months ended June 30, 2005
over the same periods in 2004 are due primarily to increases in revenue per hundredweight,
including fuel surcharges. For the three and six months of 2005, figures for LTL billed revenue
per hundredweight compared to the same periods in 2004 reflect a pricing environment that is
competitive and consistent with the prior year.

ABFs operating ratio improved to 90.9% and 93.1% for the three and six months ended June 30, 2005
respectively, from 91.6% and 94.4% for the same periods in 2004. The operating ratio improvement
resulted from a combination of firm pricing and changes in certain other operating expense
categories as follows:

Salaries, wages and benefits expense for the three and six months ended June 30, 2005 decreased
1.3% and 1.8% respectively, as a percent of revenue, when compared to the same periods in 2004,
due primarily to the fact that a portion of salaries, wages and benefits are fixed in nature and
decrease, as a percent of revenue, with increases in revenue levels. ABF has a greater number of
employees at the lower tier of the wage scale negotiated under its union contract, which
contributes to lower salaries, wages and benefits as a percentage of revenue for three and six
months ended June 30, 2005, compared to the same periods in 2004. The overall decreases in
salaries, wages and benefits as a percent of revenue, were offset, in part, by contractual
increases under the IBT National Master Freight Agreement. The five-year agreement provides for
annual contractual total wage and benefit increases of approximately 3.2%  3.4% and was effective
April 1, 2003. An annual wage increase occurred on April 1, 2005 and was 1.9%. An annual health,
welfare and pension cost increase occurred on August 1, 2004 and was 6.1%. In addition, for the
three and six months ended June 30, 2005, compared to the same periods in 2004, ABF experienced a
decrease in its DSY productivity which offset a portion of the decline in salaries, wages and
benefits as a percent of revenue. The increase in full truckload shipments, which on a per-bill
basis are generally more labor intensive to pick up and deliver, combined with fewer LTL
shipments, reduced DSY productivity. Workers compensation costs were lower as a percent of
revenue, for the three and six months ended June 30, 2005 compared to the same periods in 2004 due
primarily to a decrease in the frequency and severity of new claims. In addition, during the
second quarter of 2004, ABF incurred additional workers compensation costs of approximately $1.1
million due to an increase in the reserves associated with the insolvency of Reliance Insurance
Company (Reliance). Reliance was the Companys workers compensation excess insurance carrier
for the years 1993 through 1999. The decline in workers compensation costs was offset, in part,
by an increase in nonunion health costs.

Supplies and expenses increased 1.9% and 1.5% respectively, as a percent of revenue, when the
three and six months ended June 30, 2005 are compared to the same periods in 2004. Fuel costs, on
an average price-per-gallon basis, excluding taxes, increased to an average of $1.70 and $1.60
respectively, for the three and six months ended June 30, 2005, compared to $1.16 and $1.11 for
the same periods in 2004.

Rents and purchased transportation decreased 1.3% and 0.8% respectively, as a percent of revenue,
when the three and six months ended June 30, 2005 are compared to the same periods in 2004. This
decrease is due primarily to a decrease in rail utilization to 15.0% and 14.8% of total miles for
the three and six months ended June 30, 2005, compared to 18.2% and 16.5% during the same periods
in 2004. ABF reduced its use of rail by moving a higher percentage of freight with ABF drivers and
equipment. In many of the lanes where ABF discontinued using rail, transit-time reliability
improved and costs were reduced.

As previously mentioned, ABFs general rate increase on May 23, 2005 was put in place to cover
known and expected cost increases for the next twelve months. ABFs ability to retain this rate
increase is dependent on the competitive pricing environment. ABF could continue to be impacted by
fluctuating fuel prices in the future. ABFs fuel surcharge is based on changes in diesel fuel
prices compared to a national index. ABFs total insurance costs are dependent on the insurance
markets and claims experience. ABFs results of operations have

ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Unaudited)  continued

been impacted by the wage and benefit increases associated with the labor agreement with the IBT
and will continue to be impacted by this agreement during the remainder of the contract term.
Under this agreement, an annual health, welfare and pension cost increase of 5.7% will occur on
August 1, 2005.

Clipper

Clippers revenue for the three and six months ended June 30, 2005 increased 15.0% and 13.8%
respectively, when compared to the same periods in 2004. Clippers revenues for the first six
months of 2005 consisted of 49% intermodal revenues, 35% temperature-controlled revenues and 16%
brokerage revenues. Clippers temperature-controlled division experienced increases of 18.4% and
20.5%, respectively, in revenue for the three and six months ended June 30, 2005, compared to the
same periods in 2004, due to strong customer demand for its spot-market rail capacity. This
resulted from the availability of a large number of loads containing high-quality produce combined
with fewer truck options for moving those loads eastbound from the West Coast. Clippers brokerage
division experienced revenue increases of 30.1% and 51.7%, respectively, for the three and six
months ended June 30, 2005, compared to the same periods in 2004, due to continued good service
from its trucking partners and an increase in shipments from new customers. Revenues for Clippers
intermodal division increased 6.2% and 1.5%, respectively, for the three and six months ended June
30, 2005, compared to the same periods in 2004, due to an increase in the volume of shipments from
new and existing customers.

Clippers operating ratio improved to 95.4% and 97.5% for the three and six months ended June 30,
2005, respectively, from 97.1% and 99.7% in the same periods of 2004. These improvements are due
primarily to improved revenue levels for all divisions. Clippers higher revenue levels result in
better coverage of overhead costs.

Income Taxes

The difference between the effective tax rate for the three and six months ended June 30, 2005 and
2004 and the federal statutory rate resulted from state income taxes, tax-exempt income and
nondeductible expenses. The tax rate for the three and six months ended June 30, 2005 as compared
to the same period in 2004 is due primarily to higher income levels, a lower effective state income
tax rate and an increased amount of tax-exempt income from short-term investments.

Assets Leased to G.I. Trucking Company

See Assets Held for Sale (Note K) regarding the designation of G.I. Trucking properties as assets
held for sale and Subsequent Events (Note M) regarding the closing of the sale of the terminals to
G.I. Trucking on July 27, 2005.

Accounts Payable

Accounts payable increased $10.0 million from December 31, 2004 to June 30, 2005, due primarily to
$8.2 million in revenue equipment purchased, but not yet paid for at June 30, 2005.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)  continued

Seasonality

ABF is impacted by seasonal fluctuations, which affect tonnage and shipment levels. Freight
shipments, operating costs and earnings are also affected adversely by inclement weather
conditions. The third calendar quarter of each year usually has the highest tonnage levels while
the first quarter has the lowest. Clippers operations are similar to operations at ABF, with
revenues usually being weaker in the first quarter and stronger during the months of June through
October.

Effects of Inflation

Management believes that, for the periods presented, inflation has not had a material effect on the
Companys operations.

Forward-Looking Statements

Statements contained in the Managements Discussion and Analysis section of this report that are
not based on historical facts are forward-looking statements. Terms such as estimate,
forecast, expect, predict, plan, anticipate, believe, intend, should, would,
scheduled and similar expressions and the negatives of such terms are intended to identify
forward-looking statements. Such statements are by their nature subject to uncertainties and risk,
including, but not limited to, union relations; availability and cost of capital; shifts in market
demand; weather conditions; the performance and needs of industries served by Arkansas Bests
subsidiaries; actual future costs of operating expenses such as fuel and related taxes;
self-insurance claims; union and nonunion employee wages and benefits; actual costs of continuing
investments in technology; the timing and amount of capital expenditures; competitive initiatives
and pricing pressures; general economic conditions; and other financial, operational and legal
risks and uncertainties detailed from time to time in the Companys Securities and Exchange
Commission (SEC) public filings.

As of the end of the period covered by this report, an evaluation was performed with the
participation of the Companys management, including the CEO and CFO, of the effectiveness of the
design and operation of the Companys disclosure controls and procedures. Based on that evaluation,
the Companys management, including the CEO and CFO, concluded that the Companys disclosure
controls and procedures were effective as of June 30, 2005. There have been no changes in the
Companys internal controls over financial reporting that occurred during the most recent fiscal
quarter that have materially affected, or are reasonably likely to materially affect, the Companys
internal controls over financial reporting.

Various legal actions, the majority of which arise in the normal course of business, are pending.
None of these legal actions are expected to have a material adverse effect on the Companys
financial condition, cash flows or results of operations. The Company maintains insurance against
certain risks arising out of the normal course of its business, subject to certain self-insured
retention limits. The Company has accruals for certain legal and environmental exposures.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a) Recent sales of unregistered securities.

None.

(b) Use of proceeds from registered securities.

None.

(c) Purchases of equity securities by the issuer and affiliated purchasers.

The Company has a program to repurchase, in the open market or in privately negotiated
transactions, up to a maximum of $25.0 million of the Companys Common Stock. The repurchases may
be made either from the Companys cash reserves or from other available sources. The program has no
expiration date but may be terminated at any time at the Boards discretion. The following table
presents purchases made during the second quarter 2005:

Average

Maximum Dollar

Total Number

Price Paid

Total Number of

Value of Shares

of Shares

Per Share

Shares Purchased

That May Yet Be

Purchased During

During

as Part of Publicly

Purchased Under

Period Ending

2nd Quarter 2005

2nd Quarter 2005

Announced Program

the Program

March 31, 2005

509,150

$

11,121,544.65

April 30, 2005



$



509,150

11,121,544.65

May 31, 2005

125,000

32.39

634,150

7,072,662.40

June 30, 2005





634,150

7,072,662.40

125,000

$

32.39

See Note M regarding the Board of Directors authorization of additional amounts for its current
program to repurchase shares, subsequent to June 30, 2005.

The Companys Annual Meeting of Shareholders was held on April 20, 2005.

The first proposal considered at the Annual Meeting was to elect Robert A. Davidson, William M.
Legg and Alan J. Zakon to serve as directors of the Company. The results of this proposal were as
follows:

Directors

Votes For

Votes Withheld

Robert A. Davidson

22,484,258

629,770

William M. Legg

22,613,470

500,558

Alan J. Zakon

22,510,882

603,146

The second proposal was to approve the Executive Officer Annual Incentive Compensation Plan. This
proposal received 22,090,141 votes for adoption, 240,199 against adoption, 783,688 abstentions and
no broker non-votes.

The third proposal was to ratify the appointment of Ernst & Young LLP as independent registered
public accounting firm for the fiscal year 2005. This proposal received 22,907,472 votes for
adoption, 196,585 against adoption, 9,971 abstentions and no broker non-votes.

The fourth proposal was to approve the 2005 Ownership Incentive Plan. This proposal received
18,390,570 votes for adoption, 1,753,908 against adoption, 781,495 abstentions and 2,188,055 broker
non-votes.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

31.1

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002